UniSuper Advice helped Nathan:
- save over $5,000 a year on tax
- reduce the amount of death benefits tax his daughter might have to pay by up to $64,600
- plan for his retirement and secure his daughter's inheritance.
This case study focuses on a withdrawal and re-contribution strategy in the 2018-19 financial year. The overall advice given includes a number of other strategies designed to complement the advice given. To ensure you maximise your financial benefits, please speak to a UniSuper Private Client Adviser.
Nathan is a 64-year-old UniSuper Accumulation member earning around $85,000 a year. He intends to retire soon and start a retirement income stream using his superannuation funds.
Nathan has a little over $700,000 with UniSuper (about 95% of which is taxable or concessional) and he has made no after-tax contributions in the last three years. When he dies, Nathan wants the balance to go to Jasmine, his 35-year-old daughter. Nathan has heard about ‘death benefits tax’ which is generally 17% and may significantly reduce Jasmine’s inheritance, so he wants some advice to make sure she gets the best financial outcome. He is also aware that the Federal Government has recently changed the rules on contribution caps, including the ‘bring forward’ provisions and is a little confused about what to do.
After an initial meeting with his Private Client Adviser, Nathan agrees to a Statement of Advice (a document outlining the strategy and costs) for a fee of $3,000 (inc. GST), of which a portion can be paid from his UniSuper account. His Adviser presents him with a plan that recommends he take a ‘withdrawal and re-contribution’ strategy. This strategy will increase the tax-free component of his super by using the bring-forward provision and re-contributing $380,0002 of the $700,000 currently in his super. This means that Jasmine will receive more inheritance because of less tax to be paid. This strategy will take place before Nathan starts his retirement income.
His adviser also recommends that Nathan establishes an appropriate death benefit nomination to ensure his benefits pass to Jasmine, in line with his wishes.
The advice provided:
- Reduces the potential ‘death benefits tax’ Jasmine may pay by up to $64,600 as a result of the recommended withdrawal and re-contribution strategy. This is done by reducing the taxed amount from $665,000 to $285,000.
- Reduces tax on earnings within his super by an estimated $5,400 a year by transferring the balance to a pension.2
Could a UniSuper financial adviser help you? Get in touch to find out.
1. Nathan is a hypothetical member, but the relevant facts are based on a real member. 2. These calculations are based on legislation applicable in the 2018-19 tax year. Due to scheduled reductions in the non-concessional annual amount to $100,000, this figure will reduce from next financial year. For more information please refer to Changes to after tax super contributions on our website.